2024 (11) TMI 408 - HC - Service Tax

Service tax liability cannot be recovered under extended limitation period without proving intent to evade tax under Section 73(1)

Delhi HC upheld CESTAT's decision rejecting Revenue's invocation of extended limitation period under Section 73(1) of Finance Act, 1994 for service tax ... Extended period of limitation invoked - Service tax liability in respect of the tax period from the year 2007-2010 - invoking the provision of Section 73 (1) of the Finance Act, 1994 - SCN issued was beyond the specified period or not? - as alleged that since the assessee had failed to produce the supporting document before the CERA audit team, it appeared that the assessee had availed CENVAT credit on input services without fulfilling the conditions as prescribed under Rule 9 of the CENVAT Rules. HELD THAT:- There is no allegation against the assessee of any statutory contravention with an intent to evade tax. The case of the Revenue is solely premised on the basis that there was suppression of facts on the part of the assessee. Clearly, not producing the documents, which may be necessary for substantiating a claim, does not fall in the exception of “suppression of facts”. In any view of the matter, no express allegations were made in the SCN to the said effect. This Court in an earlier decision of M/s EMAAR MGF Land Ltd. [2023 (2) TMI 613 - DELHI HIGH COURT] concurred with the learned CESTAT that the extended period of limitation was not correctly invoked as the intent to evade tax was neither established nor evident in the given facts. No infirmity with the decision of the learned CESTAT in rejecting the Revenue’s contention that it was entitled to invoke the extended period of limitation in terms of the proviso to Section 73 (1) of the Act. Issues Involved:1. Whether the Revenue is justified in invoking the provision of Section 73(1) of the Finance Act, 1994, for assessing service tax liability for the period 2007-2010.2. Whether the Show Cause Notice (SCN) issued by the Revenue was valid, considering it was beyond the specified period under Section 73(1) of the Act.3. Whether the conditions for invoking the extended period of limitation under the proviso to Section 73(1) were satisfied.Issue-wise Detailed Analysis:1. Invocation of Section 73(1) of the Finance Act, 1994:The principal controversy in the appeal was whether the Revenue was justified in invoking Section 73(1) of the Finance Act, 1994, to assess the service tax liability of the assessee for the period 2007-2010. The assessee was registered as an Input Service Distributor and had availed CENVAT credit, but during an audit, it was found that the supporting documents for availing the credit were unavailable. The Revenue alleged that the assessee had wrongly availed CENVAT credit and issued a Show Cause Notice (SCN) for recovery.2. Validity of the Show Cause Notice:The SCN was issued beyond the one-year period specified in the main provision of Section 73(1) of the Act. The Revenue contended that the case fell under the proviso to Section 73(1), which allows for an extended period of limitation in cases of fraud, collusion, wilful mis-statement, suppression of facts, or contravention of provisions with intent to evade tax. However, the CESTAT noted that the SCN did not contain any allegations of fraud or suppression of facts, which are necessary to invoke the extended period. The absence of specific allegations in the SCN meant that the extended period could not be applied.3. Conditions for Extended Period of Limitation:The Revenue argued that the extended period of limitation was applicable due to 'suppression of facts' by the assessee. However, the CESTAT found that the mere failure to produce documents during an audit did not constitute suppression of facts. The decision referred to several Supreme Court judgments, including Collector of Central Excise v. H.M.M. Limited and Pushpam Pharmaceutical Co. v. CCE, which clarified that suppression of facts must be deliberate and with intent to evade tax. The CESTAT concluded that the SCN did not allege any deliberate act by the assessee to evade tax, and thus, the extended period was not applicable.The Court upheld the CESTAT's decision, noting that the Revenue failed to establish the necessary conditions for invoking the extended period of limitation under the proviso to Section 73(1) of the Act. The appeal was dismissed as unmerited, with no substantial question of law arising from the case.